While an ongoing labor stalemate seems all but certain to disrupt the 2022 MLB season, Sinclair Broadcasting’s Bally Sports unit is quietly going about the business of bolstering its own Opening Day lineup. The media company this morning revealed that it has secured the in-market streaming rights for a fifth MLB club, a move that should further prime the launch of its new direct-to-consumer service.
Speaking to analysts during Sinclair’s fourth-quarter earnings call, president and CEO Chris Ripley said the company had re-upped with one of its 14 MLB partners just a few weeks ago, bringing the total number of streamable franchises under the Bally Sports banner to 33. Unlike the two blanket renewals that locked in streaming rights for all 16 of Sinclair’s NBA partners and each of its 12 NHL clubs, Sinclair is going about the business of upgrading its MLB contracts on a team-by-team basis.
While Ripley did not identify the MLB team in question, RSN sources pegged the Tampa Bay Rays as the latest Bally Sports partner to sign off on the DTC offering. The Rays join a roster of early adopters that includes the Kansas City Royals, Milwaukee Brewers, Miami Marlins and Detroit Tigers.
In terms of local TV ratings, the Rays are in the middle of the pack, averaging around 47,000 viewers per game on Bally Sports Sun. The timing of the Rays’ renewal was particularly fortuitous, given that Sinclair’s carriage deal with Spectrum is set to expire before the end of March. With 98.9% coverage in Hillsborough County, of which Tampa is the county seat, Spectrum is by far the dominant cable operator in the home market. If the two sides can’t come to an agreement and Sun goes dark, Rays fans will still be able to catch all the action via the new DTC service—provided baseball actually gets played this spring.
Getting dropped by an operator is now about as common and pernicious as the infield shift. Among the pay-TV providers and virtual multichannel video programming distributors (vMVPDs) that don’t carry the Bally Sports RSNs include DISH Network, fubo TV, YouTube TV and Hulu.
Ripley said a soft launch for the new streaming product will take place in the second quarter, with fans in the five certified MLB markets getting the first crack at it. The company plans to broaden the scope of its DTC rollout in the back half of the year, as the NBA and NHL seasons get underway. It’s a massive undertaking for Sinclair, which looks at streaming as a means to future-proof the RSN model without cannibalizing the core linear-TV component.
“As you can imagine, this is a large project with many internal work streams occurring simultaneously to allow us to meet our launch targets,” Ripley said. “The potential market for a DTC product is significant, as approximately 83-million households are in the territories for which we currently have DTC rights.”
Sinclair is financing the launch via a first-lien loan of $635 million, which Ripley said should be accessible by March 1. According to the 8-K Sinclair filed this morning with the Securities and Exchange Commission, the company’s total debt load as of Dec. 31 was $12.3 billion, which includes $8.15 billion owed by the Diamond Sports Group unit. A year ago, the debt stood at $12.6 billion.
Adjusted EBITDA for the RSN unit in 2021 was $547 million, which marked a 35% drop versus the previous year’s $841 million. Sinclair last year paid out $2.07 billion in sports rights fees. Across the company, ad sales revenue was flat versus 2020 at $1.69 billion, with some $63 million in marketing spend having been erased by an October ransomware incident. Automotive spend continues to be soft, although Ripley said mid-term political spending and the sports-gambling boom should make for a significant rebound this year.
Ripley said Sinclair is looking to re-up with some of its other legacy MLB partners later this year but did not provide any insight as to which franchise was next up in the batter’s box. “Over the last two years we’re batting 1.000 in terms of our renewals,” Ripley said. “It takes some time, [it’s] sort of a team-by-team situation, but our history would tell us that we will continue to be successful there.”
Along with the expansion of its live-streaming rights, Sinclair’s DTC scheme is being tricked out with interactive features like in-game wagering, daily fantasy sports apps and whatever the hell NFTs are. One of the few things missing as spring draws near is a price point. While Sinclair still hasn’t disclosed how much it plans to charge its DTC customers, projections it made in January suggest something in the neighborhood of $20.25 per month.
Perhaps the greatest threat to Sinclair’s DTC strategy is MLB itself, which may be plotting to smother the startup in the crib before it can interfere with baseball’s own streaming aspirations. The league has been in talks with Apple (market cap: $2.64 trillion) regarding a possible partnership, and a league-wide approach to in-market streaming powered by the people who brought you the iPhone could make Sinclair an also-ran despite its first-mover advantage.